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Nikkei Markets

Singapore Exchange's quarterly profit hits decade high

Debt program of S$1.5 billion hints at acquisitions

The Singapore Exchange earlier this year tightened the rules for listed companies appointing auditors. (Photo by Ken Kobayashi)

SINGAPORE (Nikkei Markets) -- Singapore Exchange posted its strongest quarterly results in more than 10 years as derivative trading volumes soared, driven by greater interest from investors outside Asia.

SGX also said it saw good growth opportunities as emerging Asian markets become more international. The 1.5-billion Singapore dollars ($1.1 billion) multicurrency debt issuance program it set up earlier this month will help it pursue investment opportunities, the exchange operator said.

CEO Loh Boon Chye said SGX is attracting more investors from outside the Asian region as seen by the sharp rise in overnight trading -- to 18% of total derivatives volumes in the latest quarter from 10% about two years ago.

SGX's derivatives business has expanded strongly in recent years even as cash stocks trading has languished.

For its first quarter ended September, the bourse operator made a net profit of S$114 million, an increase of 25% over the same period last year. The results were much better than the consensus estimate of S$103 million in a Refinitiv poll.

Loh said it was the highest quarterly net profit in more than 10 years.

Revenue rose 19% to S$248 million as currency and commodities derivatives revenue increased by 62% on year and proceeds from equity derivatives gained 21%.

The cash equities business, usually the weak link, managed to grow revenue by 8% on year despite a slight dip in the daily average value of shares traded, with the gains coming from areas such as corporate actions and securities settlement while depository management grew.

With the exception of real estate investment trusts, SGX has struggled to attract new stock listings in recent years as companies opt for rival markets such as Hong Kong and Australia in the hope of getting higher valuations for the shares. The Singapore bourse operator has also been hit by a spate of delistings.

For the three months ended September, cash equities accounted for 36% of SGX's total revenue, down from 40% a year earlier, while currency, commodities and equity derivatives together contributed to 52% of revenue, up from 47% a year ago.

CEO Loh said SGX would continue its strategy of offering international investors a "single point access" to Asia through a wide range of contracts.

SGX has also been expanding, although its investments have been relatively small in recent years. In 2010, SGX attempted to buy Australia's ASX for around A$8 billion ($5.47 billion) to create what would have been the world's fifth-largest bourse operator. But its bid was rejected due to political concerns in Canberra.

Recently, in March, SGX paid $25 million for a 20% stake in foreign exchange futures platform BidFX.

Its multicurrency debt program, its first-ever, has raised the possibility that the bourse operator may be ready to make a sizable purchase.

Interest in mergers and acquisitions involving exchanges has picked up in recent months following the London Stock Exchange's purchase of data and analytics company Refinitiv in July for $27 billion. That deal was aimed at expanding LSE's trading business beyond shares and derivatives to currencies and market data.

Hong Kong Exchange and Clearing subsequently made a $36-billion bid for LSE but was rebuffed.

--Kevin Lim

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